It’s too early to say exactly what the market implications are for renewables — what states will adopt which resources. A study by the Natural Resources Defense Council found that energy efficiency offers the least expensive way to reduce carbon emissions. But Peter Altman, director of NRDC’s Climate and Clean Air Campaign, said that “the standards will create a market opportunity for a full suite of clean energy investment, including renewables.”
Andrew Steer, president and CEO of World Resources Institute, also sees the carbon standards catalyzing investment in renewable energy, given its falling costs and increased use.
“In Georgia, Minnesota and New Mexico renewable energy has emerged as the cheaper option for new electricity generation. The same holds true in Texas, which now has more wind power capacity than all but five countries. Earlier this year solar energy provided a record 18 percent of California’s energy demand,” he said.
Utilities and states are likely to push to get credit for existing solar facilities starting immediately — all the way down to the residential level, said Dan Bedell, Principal Solar’s executive vice president for strategic and corporate development.
“This scenario shapes up to look a lot like a REC structure for renewable energy, where utilities and states will want to offset existing pollution with clean sources,” he said. “If the outside the fence approach is adopted, the biggest impact is likely to occur in the states with the most polluting facilities and the most fossil power plants on the books that are not fully amortized. It is likely to be cheaper to purchase RECs than it will be to mothball functioning, non-depreciated power plants. In these states, larger solar facilities will be necessary to offset the larger pollution quantities.”
Even though renewables such as solar and wind do not displace fossil fuels one-to-one — because of intermittency and grid complexities — they can profoundly reduce carbon while maintaining reliable energy flow, according to a recent report by the Solar Energy Industries Association. If Western Interconnect, for example, generates 33 percent of its power from wind and solar, it will cut carbon emissions by 29 to 34 percent, the report said. The PJM Interconnection, the nation’s largest organized market, can cut carbon by 28 percent with renewables by 2026. And even with 30 percent solar and wind in its mix, the grid operator would experience no significant operating issues, said SEIA, siting a PJM study.
President Barack Obama has pushed for carbon restrictions since he took office, but Congress blocked his attempts to create a cap and trade program. As a result, he is using his executive authority under the Clean Air Act to create the new draft rule.
The proposal now goes into a public hearing phase, which is likely to generate strong sentiment for and against. Lawsuits are inevitable, although legal experts say the rule stands a good chance of being upheld given recent precedent.
Even before the rule was out, its critics began pummeling it. The U.S. Chamber of Commerce said it will cost the U.S. economy $50 billion per year through 2030. In its blog, the EPA said the chamber’s figure stems from faulty assumptions. Specifically, the EPA said that it assumes that states would need to use expensive carbon capture and sequestration (CCS) for new natural gas plants to hit their goals. “EPA has indicated frequently that CCS would not be considered for existing power plants,” the blog said.
The volley is one of many likely to come as the EPA prepares the final rule, expected out next June. And controversy will continue beyond that as the states prepare their plans. Look for this to be one of the most galvanizing — and perhaps influential — decisions in U.S. energy policy for the next several years.
Lead image: Power plant emissions via Shutterstock